Tag Archives: NAFTA

Mexico joins Canada, notifies U.S. it’s ready to implement new NAFTA

The Mexican government notified Canada and the U.S. late Friday that it is ready to implement the revised North American trade agreement, leaving it up to the Americans now to decide when the deal should take effect.

Jesús Seade, Mexico’s chief negotiator, announced the news on Twitter overnight, saying in Spanish that “with this, we will have a modern instrument that will strengthen the competitiveness of the region and energize the trilateral relationship.”

Juan José Gómez Camacho, Mexico’s ambassador to Canada, followed that tweet with one of his own on Saturday morning, adding that “this new instrument will strengthen the North American region and provide new dynamism to our economies.”

Canada was the first to notify its NAFTA partners Thursday that it was ready to set a date for the revised deal to take effect.

All eyes are now on the U.S. government to decide when it wants to proceed.

All three countries have ratified the deal.

The text of the agreement says it will take effect on the first day of the third month after all three partners have notified the others they’ve changed their relevant laws, regulations and other administrative systems and are ready to comply.

If the U.S. gives its notice before the end of April, the earliest the new measures could take hold is July 1. 

Prime Minister Justin Trudeau said on Saturday that Canada will continue to work with Mexico and the U.S. on implementing the new NAFTA, but he said the deal is taking a back seat to the response to COVID-19.

“The people who usually work very, very hard on ratification of trade deals are — like most people in government — very much focused on our response to COVID-19, and that needs to be our priority right now,” said Trudeau.

In the meantime, Trudeau said, the previous NAFTA agreement remains in place.

Coronavirus disrupting implementation

It’s not clear how soon the U.S. will act.

The Trump administration had wanted the deal in place before June 1. But that was before COVID-19 substantially disrupted the North American economy and dramatically altered cross-border travel and trade. 

On Monday, a bipartisan group of American senators called for a delay, saying “a long experience of incomplete and inadequate implementation by trade agreement partners has taught us that the United States must do this work on the front end to ensure that the words on paper deliver genuine benefits to Americans.”

Key industries that have to make substantial changes as a result of the deal, such as the automotive sector, have been siginificantly disrupted by the coronavirus, with some facilities no longer able to focus on re-evaluating their North American supply chains for compliance, as they retool instead to make urgently needed medical equipment.

“The COVID-19 pandemic has impacted governments, businesses, workers, and farmers globally, leaving little, if any, time and resources to prepare for a smooth transition to [the United States–Mexico–Canada Agreement],” the senators’ letter to United States Trade Representative Robert Lighthizer said. “USMCA should not enter into force prematurely.”

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U.S. House passes new North American trade pact to replace NAFTA

The U.S. House of Representatives overwhelmingly approved a new North American trade deal on Thursday that includes tougher labour and automotive content rules but leaves $ 1.2 trillion US in annual Canada-U.S.-Mexico trade flows largely unchanged.

The House passed legislation to implement the Canada-U.S.-Mexico Agreement (CUSMA) on trade 385-41, with 38 Democrats, two Republicans and one independent member voting no.

The bipartisan vote contrasted sharply with Wednesday night’s Democrat-only vote to impeach U.S. President Donald Trump.

The House vote sends the measure to the Senate, but it is unclear when the Republican-controlled chamber will take it up. Senate Republican leader Mitch McConnell has said that consideration of the measure would likely follow an impeachment trial in the Senate, expected in January.

The CUSMA trade pact, first agreed upon in September 2018, will replace the 1994 North American Free Trade Agreement (NAFTA). Trump vowed for years to quit or renegotiate NAFTA, which he blames for the loss of millions of U.S. factory jobs to low-wage Mexico.

House Speaker Nancy Pelosi gave CUSMA a green light last week after striking a deal with the Trump administration, Canada and Mexico to strengthen labour enforcement provisions and eliminate some drug patent protections.

Pelosi said she was not concerned about Democrats handing Trump a political victory on CUSMA as they are trying to remove him from office.

“It would be a collateral benefit if we can come together to support America’s working families, and if the president wants to take credit, so be it,” Pelosi said during House floor debate before the vote.

Secretary of State Mike Pompeo said on Twitter that the CUSMA was a “historic milestone” in Trump’s effort to modernize trade relations.

The changes negotiated by Democrats, which include tighter environmental rules, will also set up a mechanism to quickly investigate labour rights abuses at Mexican factories. They have earned the support of several U.S. labour unions that have opposed NAFTA for decades.

U.S. trade representative Robert Lighthizer made a concession by dropping a requirement for 10 years of data exclusivity for biologic drugs, a provision that Democrats feared would keep drug prices high and that they called a “giveaway” to big drugmakers.

Some of the most ardent trade skeptics in Congress have voiced support of the deal, including Rep. Debbie Dingell, who represents an autoworker-heavy district in southeastern Michigan. Dingell said in television interviews that she backed the bill, even though she was skeptical it would bring auto jobs back to Michigan. Rep. Ron Kind, a pro-trade Democrat from Wisconsin, one of the top dairy-producing states, praised new access to Canada’s closed dairy market under CUSMA.

“A no vote is a return to the failed policy of the old NAFTA, the status quo, rather than this more modernized version,” Kind said in floor debate.

Democrats and U.S. President Donald Trump’s administration have for months been negotiating over the finer details of CUSMA. (Drew Angerer/Getty Images)

The agreement modernizes NAFTA, adding language that preserves the U.S. model for internet, digital services and e-commerce development, industries that did not exist when NAFTA was negotiated in the early 1990s. It eliminates some food safety barriers to U.S. farm products and contains language prohibiting currency manipulation for the first time in a trade agreement.

But the biggest changes require increased North American content in cars and trucks built in the region, to 75 from 62.5 per cent in NAFTA, with new mandates to use North American steel and aluminum.

In addition, 40 to 45 per cent of vehicle content must come from high-wage areas paying more than $ 16 an hour — namely the United States and Canada. Some vehicles assembled in Mexico mainly with components from Mexico and outside the region may not qualify for U.S. tariff-free access.

The U.S. Congressional Budget Office estimated earlier this week that automakers will pay nearly $ 3 billion more in tariffs over the next decade for cars and parts that will not meet the higher regional content rules.

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CBC | World News

U.S.-Mexico trade deal announcement during NAFTA talks led to sleepless nights: envoy

The most difficult moment of Canada’s NAFTA negotiations with the United States came when U.S. President Donald Trump announced he had struck a bilateral deal with Mexico, says Canada’s ambassador in Washington

“The most difficult one for us was when the U.S. and the Mexicans came to a two-way deal on the NAFTA negotiations,” David MacNaughton told CBC News. 

“What ended up happening was not what we agreed to in advance,” he said.

“The Mexicans and the Americans were going to be talking but only [about] bilateral issues. [But] they had involved a whole series of things that we agreed in advance were not going to be dealt with until we were back at the table.”

Trump made the announcement in the Oval Office in late August, 2018, saying the deal would replace the existing NAFTA agreement. 

Would Canada can be part of it? “We will see,” Trump said at the time

Ambassador David MacNaughton describes what he feels was the toughest moment during his time as Canada’s representative in Washington. 1:19

MacNaughton said the Canadian team was put in a tough spot because they were under pressure to sign a deal, since not being a part of the pact would have dire consequences for the Canadian economy.

The ambassador, who will leave his post at the end of the summer, said the Canadian government took the position that it needed to stand firm and fight for elements that had been left out of the Mexico-U.S. deal.

Chief among them was the dispute resolution mechanism that allows countries to seek outside adjudication if they felt another country was flouting the rules of the trade pact. 

“There were a lot of sleepless nights,” he said. “The thing that puts you under enormous pressure in these circumstances is you realize that you’re dealing with real people’s jobs, with communities, with the consequences of making a bad deal, [which] are very serious for a lot of communities right across the country.”

In the end, MacNaughton said, the determination to stick with the strategy Canada had at the outset helped ensure that a deal beneficial to all three countries could be reached without leaving a sour taste in anyone’s mouth. 

“We were able to put it back together,” he said. “We ended up getting the things that we needed to get out of the agreement.”

“I don’t blame the Mexicans for doing what they did. They did what they thought was going to be best for Mexico. And we did what we thought was best for Canada, and the Americans did what they thought was best for the United States. And what we were able to do was to actually find a win-win-win situation.”

MacNaughton says Trump’s 2018 announcement that the U.S. had struck a trade deal with Mexico violated an agreement that Trump’s team would only negotiate bilateral issues with Mexico until Canada could return to the negotiating table. (Jason Burles/CBC)

MacNaughton also reflected on a recent story by Axios that revealed how Trump reacted to the cover of the May 1-7, 2017, issue of Bloomberg Businessweek that featured an image of Prime Minister Justin Trudeau headlined “The Anti-Trump.”

According to the report, Trump tore off the cover and wrote across it in silver Sharpie a statement akin to “Looking good! Hope It’s not true!” before sending it to Trudeau through diplomatic channels.

MacNaughton said he had to reach out to the White House to determine if the note actually did come from the president, a routine the ambassador said he had followed a number of times over statements attributed to Trump in the American media.

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Threat of U.S. tariffs on Mexico roils markets, dims hopes for new NAFTA

Stocks fell sharply and hopes for swift passage of a new NAFTA deal dimmed after U.S. President Donald Trump announced new tariffs that will apply to all imports from Mexico, starting June 10. 

In tweets overnight, Trump said he is slapping a five per cent tariff on all Mexican imports until it does more to block the surge of Central American migrants trying to cross the U.S. border.

Unless Mexico can stop the flow of migrants, which would necessitate either closing its own southern border or negotiating with each of the troubled states they come from, the president is promising the tariffs will rise five percentage points each month and could be 25 per cent by Oct. 1.

Honduran migrant children eat a meal at the Jesus del Buen Pastor del Pobre y el Migrante shelter, in Tapachula, Chiapas state, Mexico. Trump wants Mexico to stop such migrants from trying to cross the U.S. border. (Marco Ugarte/Associated Press)

U.S. imports from Mexico totalled $ 346.5 billion US in 2018, up 10.3 per cent from 2017 and range from avocados to auto parts.

The tariff would apply every time a part or final product passes across the U.S.-Mexico border and is seen as very negative for trade and jobs, while raising prices for American consumers.

In a tweet Friday, Trump said that if he imposes tariffs on Mexico, companies will leave that country to avoid paying them and relocate to the U.S.

“In order not to pay tariffs, if they start rising, companies will leave Mexico, which has taken 30 per cent of our auto Industry, and come back home to the U.S.A.,” Trump wrote.

But business was unhappy with the development, warning the tariffs would have devastating consequences on manufacturers and consumers. 

“Imposing tariffs on goods from Mexico is exactly the wrong move,” said Neil Bradley, executive vice-president of the U.S. Chamber of Commerce, which is exploring legal action in response to the tariffs. “These tariffs will be paid by American families and businesses without doing a thing to solve the very real problems at the border. Instead, Congress and the president need to work together to address the serious problems at the border.”

Auto sector hit hard

Carmakers, which could be especially vulnerable to business disruptions from the tariffs, took big losses in early trading Friday. General Motors, which imports more vehicles into the U.S. than any other U.S. automaker, tumbled more than four per cent Friday. Ford was down three per cent.

Technology and financial sector stocks also slumped.

In New York, the Dow declined 354 points to 24,804 by the close and the broader S&P index fell 36 points to 2,751. This is the first losing month this year for U.S. stocks, with the Dow down 5.7 per cent on the month and S&P off 5.6 per cent.

Toronto stocks followed the U.S. down, with the TSX closing down 63 points to 16,025, mainly on a hit to the oil sector. The TSX is off 2.3 per cent this month, after rising steadily since the beginning of the year.

Because Mexico is an oil exporter and its heavy oil is refined at Gulf Coast refineries, oil prices fell worldwide. There was fear that with the new NAFTA in jeopardy and the trade war with China ongoing, global demand would slow.

West Texas Intermediate, the benchmark North American contract, was down $ 3.30 US or 5.8 per cent to $ 53.30 US. Western Canada Select, a Canadian crude contract, fell $ 2.67 cents to $ 36.77 US a barrel, its lowest price since January. 

Loonie, peso fall

The Mexican peso fell by about 2.6 per cent against the U.S. dollar and the loonie sank below 74 cents US.

Mexico’s Banco Base warned the tariffs could knock 2.85 percentage points off Mexico’s exports. About 80 per cent of its exports go to the United States.

Chris Krueger, of Cowen Washington Research Group, speculated the new trade turmoil would leave any new Canada-U.S.-Mexico Agreement (CUSMA) dead in the water.

“Trump unveiled a one-two punch that we believe will make [CUSMA] extremely hard to pass in both Mexico and the U.S. Our base case yesterday was that [the deal] would be ratified into law by the end of the year — we do not see a path for that now,” he wrote in a note to clients.

The second punch, after the tariffs, was the notification that the White House would push ahead to submit the new trade deal for approval, undermining delicate negotiations with House Democrats.

Mexico has already made its objections to the tariffs known and signalled it may retaliate.

Mexico reacts

Jesus Seade, the trade negotiator for Mexican President Andrés Manuel López Obrador, said Thursday in a news conference that if the tariffs come to pass, “we should respond in a forceful way.” But he said right now that it is important to find out whether these tariffs are “really on the table.”

He said if Trump is serious, the move is bad for “two countries that are trying to arrive at a marvellous free trade treaty, the best in history, according to President Trump.”

Canada’s Foreign Affairs Minister Chrystia Freeland expressed confidence that Mexico would go ahead with ratifying the treaty, which is before its parliament.

“The Mexican president has said today, speaking for Mexico, that Mexico intends to move ahead with its ratification process,” she said.

López Obrador announced Friday he was sending his foreign minister to Washington, D.C., to negotiate with U.S. officials ahead of the June 10 deadline set by Trump.

He said he wants to avoid confrontation with the U.S., but that Mexico is doing all it can to curtail illegal immigration. He pointed out most of the migrants are not Mexican, but from Honduras and Guatemala.

“We have to help so that they don’t enter the United States illegally, but we also have to do it respecting human rights,” López Obrador said. “Nothing authoritarian. They’re human beings.”

In the meantime, investors are fleeing the risk, says Derek Holt of Scotiabank Economics.

“When trade negotiations and deals prove to be worthless because the U.S. signature has been debased, then the only fair assumption is to brace for soured trade and investment prospects across the global economy, including in the U.S.” he said, describing the mood in the markets.

“In this scenario, China, America’s NAFTA partners, Europe and Japan all balk at even attempting negotiation with this U.S. administration and we wind up in a protracted stalemate that severely damages confidence.”

A competing theory among investors is that the fear is overblown and that Congress will rein Trump in before he does serious damage to trade and the markets, he said.

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Canada returning to NAFTA talks earlier than expected

NAFTA talks are resuming at the decision-maker level sooner than expected, with Canada's foreign affairs minister set to return to Washington on Tuesday.

A spokesperson for Chrystia Freeland's office said the minister will be in D.C. for meetings tomorrow before travelling to Saskatoon for the Liberal caucus retreat.

She also may return to Washington for more meetings at the end of the week, but that has yet to be confirmed. 

NAFTA decision makers stepped away from the talks on Friday, while lower-level technical negotiators from Canada and the United States continued to meet through the weekend.

When the political-level talks broke off, those discussions were not expected to resume until later in the week because of scheduling conflicts.

U.S. Trade Representative Robert Lighthizer was in Brussels on Monday for meetings with his European counterparts about tariffs.

A source with direct knowledge of the talks said Canada is eager to secure an agreement soon, adding that getting to a new NAFTA deal will become more difficult the longer talks drag on.

The source, who spoke with CBC News on the condition of anonymity due to the sensitive nature of the discussions, also said the Canadian side wants NAFTA talks wrapped up prior to the end-of-the-month deadline set by the U.S. side.

But progress behind the scenes has been described by multiple sources as "slow," with several key issues still unresolved.

Disputes, dairy, procurement, and culture

One of the sticking points that is getting the most attention so far is Canada's demand to keep an independent dispute resolution system within the trade pact.

The Canadians are demanding that the dispute resolution mechanism Chapter 19, or a version of it, be kept in NAFTA. The Americans want the system scrapped in favour of using U.S. courts to resolve trade disputes.

Two senior sources say the U.S. appears to be testing Canada's limits on this position, to see whether it is serious.

Prime Minister Justin Trudeau has said publicly that maintaining a dispute resolution system is a bedrock condition for Canada — and even took a shot at U.S. President Donald Trump over the issue.

"We need to keep the Chapter 19 dispute resolution because that ensures that the rules are actually followed. And we know we have a president who doesn't always follow the rules as they're laid out," Trudeau told an Alberta radio station last week.

Another significant sticking point is the U.S. demand that Canada make concessions to allow American farmers to sell more dairy products north of the border.

Multiple sources say the Americans are not satisfied with the compromises Canada has proposed.

Sources also say negotiators are not in agreement over proposed changes to the rules for procurement.

When the Americans originally put new procurement demands on the table, Canada's chief NAFTA negotiator Steve Verheul described it as the "worst offer ever made by the U.S. in any trade negotiation."

Verheul told reporters, it "… would leave us in a position where the country of Bahrain would have far better access to U.S. procurement markets than Canada would, or that Mexico would, and we've clearly said this kind of offer is not possible."

Canada is also pushing to ensure it can keep cultural exemptions in a renegotiated deal.

Sources say the U.S. has not confirmed whether it is willing to keep the carve-outs used to protect Canadian cultural industries.

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What to watch for if the NAFTA talks conclude

More than a year of negotiations might reach a breakthrough Friday, if Canada, the United States and Mexico agree on a rewrite of the North American Free Trade Agreement.

The talks, which kicked into high gear on Monday — when U.S. President Donald Trump said he'd struck a new, preliminary deal with Mexico — had reached a "very intense rhythm" by the end of the week, according to Foreign Affairs Minister Chrystia Freeland.

"We've all had a night to reflect," Freeland said on her way in Friday morning, adding she was looking forward to hearing what the Americans had to say.

Here's what to watch for if a new, trilateral agreement is reached by Friday's deadline:

The cornerstones

The critical objective for all three sides has been a new chapter on the automotive sector, which represents about a quarter of NAFTA trade. Based on Monday's announcement, Canada's likely signing off on new rules for determining what vehicles and parts are eligible to avoid tariffs.  

A new agreement could ease uncertainty in North American supply chains, and dodge Trump's threat of car tariffs as high as 25 per cent — at least for those vehicles that comply. But analysts suggest that, even without punishing tariffs, cars will be more expensive in North America and its industry will be less competitive globally. 

At least two of NAFTA's dispute settlement chapters are on the table. 

Chapter 11, which allows companies harmed by arbitrary government actions to sue, was watered down in the agreement with Mexico. Canada might approve, or lobby to go further. Ottawa agreed to suspend similar investor-state dispute settlement provisions and pursue a permanent court-based approach in its trade deal with the European Union. 

Chapter 19, which allows companies who feel their imports have been unfairly hit with anti-dumping and countervailing duties to request NAFTA panel arbitration, is something the U.S. wants to scrap. Canada has been fighting to keep it.

Debate over NAFTA's dispute mechanisms comes as all three countries consider sweeping reforms to the World Trade Organization. The WTO could mediate disputes if efforts to strengthen it succeed, but Trump mused about pulling out of the WTO entirely again this week.

Concessions to brace for

As Jean Charest said, Canada is trying to find a way to allow Trump to say "I won" while still being able to say "[we]have not lost." 

Trump has made it plain that American farmers must be able to export more to Canada.

The U.S. needs to export milk to deal with its chronic oversupply problem — one that Canada avoids with its strict production quotas. The dairy sector was said to be one of the last unresolved items as NAFTA talks continued into Thursday night. 

The egg and poultry sectors also benefit from Canada's supply management system. It's unclear whether they're on the table again too.  

Parts of the draft intellectual property agreement with Mexico — longer exclusivity periods for costly biologic drugs, or an extension of copyright terms to 75 years — could also be tough for Canada.

Plus, as any trade watcher will tell you: Prepare for the fine print. 

Foreign Affairs Minister Chrystia Freeland was in and out of meetings with U.S. Trade Representative Robert Lighthizer all day on Thursday. A media stakeout continued on the sidewalk outside. (Chris Wattie/Reuters)

What might be missing

Some of Canada's objectives seem like long shots, particularly if talks stick to a "NAFTA-light" scenario, focusing only on priority chapters, for speed.

Canada might have wanted to open up government procurement, but given Trump's fondness for "Buy America," that feels like a tall order.

Some industries wanted to revise labour mobility provisions, updating a list of professions to include jobs that didn't exist in 1993. 

But on Monday, asked if the number of NAFTA Professional (TN) visas would change, one U.S. official said bluntly: "No."

The Liberal government promotes its "progressive" trade agenda, aimed at keeping key voters onside. While more labour and environmental protections are expected, it's unclear whether the tight negotiating timelines allow a gender chapter, as Canada's added to other agreements, or an Indigenous chapter. 

The U.S. wanted a five-year sunset clause on the entire, renegotiated agreement, but its deal with Mexico backed that off to a 16-year term, renewable following a six-year review.

NAFTA is the new TPP

You'll never hear American officials say it, because Trump thinks Barack Obama's trade agreement with 11 other Pacific Rim countries was a horrible deal. 

But when the preliminary deal with Mexico was announced, it included things the U.S. gave up when Trump pulled out of the Trans-Pacific Partnership, like tougher intellectual property clauses. (Remember the fight over "notice and takedown" requirements for online copyright violations? It's back.) 

Part of why Canada wanted to join the TPP negotiations, alongside the U.S. and Mexico, was that it was a NAFTA do-over: a way to update chapters written in the early 1990s.

When the U.S. gave up on the TPP, it needed a do-over: updating NAFTA

"There literally is not an area where we didn't 'plus up' what we did before," said one U.S. official, who was asked what was different. If all three countries reach a new NAFTA, pull out the TPP text and compare.

What happens next?

Officials said an agreement will be notified to the U.S. Congress on Friday: either a deal between the U.S. and Mexico, which Canada could join, perhaps within the 30 days before a final text is due, or a new trilateral deal. Meeting this deadline means the outgoing Mexican administration can sign it before its Dec.1 handover.

A lot could still go sideways. A new U.S. Congress will be elected in November, and those lawmakers will vote yea or nay on the Trump administration's work. Critics already predict a vigorous debate about whether this is really a better deal.

The incoming Mexican administration sat in on the final talks, but if Mexican opposition ramps up, it's unclear how the new president, Andres Manuel Lopez Obrador, will respond.

Lighthizer walked Mexico's secretary of the economy Idelfonso Guajardo over to the White House to announce their preliminary agreement on Monday. (Luis Alonso Lugo/Associated Press)

Canada's federal election is a year out. But a large loss for the dairy industry could be expensive for Finance Minister Bill Morneau's pre-election budget: the Harper government's concessions in TPP came with a compensation pledge of over $ 4 billion.

Provincial elections are also on in New Brunswick and Quebec, where a big dairy concession would be big news.

Canada and Mexico will want the U.S. to de-escalate their steel and aluminum tariff fight, and provide assurances car tariffs are off the table. Watch to see if Canada ramps up its emergency safeguard measures in return, to guarantee Trump that cheap foreign steel isn't entering North America.

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Why to keep an eye on pharmaceuticals in NAFTA talks

Canada's trade negotiators reportedly pushed back on a single bullet point about the new trade deal between the U.S. and Mexico that a health policy expert says could boost prescription drug prices for Canadian patients.

The U.S. Trade Representative's fact sheet on the new deal, revealed Monday, says it will "require at least 10 years of data protection for biologic drugs."

Currently in Canada, biologics are protected from competition from follow-on or generic-like products for eight years.

Increasing the protection to 10 years "is a big thing that will have an important impact on drug cost in Canada," according to Marc-André​ Gagnon, a pharmaceutical policy researcher at Carleton University in Ottawa who's researched data protection in trade agreements. 

"Especially in the context when we're discussing the implementation of a national pharmacare system in Canada."

Biologics are drugs such as antibodies derived from living organisms. Remicade — used to reduce inflammation in Crohn's disease, rheumatoid arthritis and other illnesses — is an example. 

Marc-Andre Gagnon wants Canadian negotiators to require greater R&D from drug companies under NAFTA. (Marc-André Gagnon/Evidence Network)

"Contrary to all other countries the most-sold drug in Canada is Remicade," said Gagnon.

"The third most-sold is Humira," another biologic used to treat forms of arthritis, Crohn's and ulcerative colitis.

In 2017, seven of the top 10 medicines contributing to growth in patented drug sales in Canada were biologics, according to the Patented Medicine Prices Review Board's annual report released last week. 

When U.S. President Donald Trump released his blueprint to lower drug prices in May, he said "excessively high drug prices, foreign freeloading, and a system rigged to reward list price increases, are burdening the American people."

The U.S. previously pushed for stronger protections on biologics under the defunct Trans Pacific Partnership, such as matching the 12 years of exclusivity for biologics that companies receive in the U.S. As the Cato Institute noted, intellectual property protection has powerful industries behind it and strong advocates in Congress. 

But Gagnon said under Trump, the U.S. government's proximity with Big Pharma has increased — for instance, with the appointment of a former pharmaceutical executive as secretary of health — without solving the problem of high drug prices in that country.

Gagnon says Canadian negotiators should demand conditions such as greater R&D-to-sales investments by drug companies in Canada before considering greater intellectual property protections for pharmaceuticals.

The exact details of the U.S. and Mexico agreement are not publicly available.

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Trump announces U.S.-Mexico trade deal to replace NAFTA, and says 'we'll see' if Canada can join

U.S. President Donald Trump announced a new trade agreement with Mexico Monday that he says will replace the North American Free Trade Agreement.

Will Canada can be part of it? "We'll see," Trump said, suggesting that if Canada is prepared to negotiate fairly it should be simple. He said the U.S. would put automotive tariffs on Canadian imports if talks don't succeed.

Foreign Affairs Minister Chrystia Freeland is now on her way to Washington to join the talks.

"They want a negotiated deal very badly," Trump said of Canada, adding that just applying car tariffs would be easier to do than working out an agreement with the third NAFTA partner. 

"Perhaps the other [deal] would be much better for Canada," he said.

Trump said the name NAFTA has a "lot of bad connotations to a lot of people" and suggested renaming the agreement the U.S.-Mexico free trade agreement.

U.S. President Donald Trump had Mexican President Enrique Pena Nieto on the phone as he told reporters the two countries had made a breakthrough in their trade negotiations. (Kevin Lamarque/Reuters)

While he was speaking to reporters in the Oval Office, he had Mexican President Enrique Pena Nieto on speakerphone.  After a few technical difficulties establishing the call, Pena Nieto emphasized repeatedly that Canada now needed to join the talks so it could be incorporated into the agreement.

The Mexican president said that negotiations are now required on "sensitive" bilateral matters between the U.S. and Canada. 

Currently, NAFTA's agriculture provisions are composed of a series of three bilateral deals, so changes must be renegotiated separately for this chapter, for example.

U.S. trade representative Robert Lighthizer, who was congratulated by Trump for reaching the deal with Mexico, said they hoped to conclude talks with Canada by Friday in order to comply with the 90-day window required by Congress before a deal could be signed with the outgoing Mexican administration. Pena Nieto leaves office on Dec. 1.

High-stakes talks now with Canada

Trump again mentioned Canada's "300 per cent" dairy tariffs as an issue between the two countries.

The U.S. president said American farmers "are going to be so happy" with this deal.

"Farmers have stuck with me," Trump said, adding that "Mexico has promised to immediately start purchasing as much farm product as they can."

However, it remains unclear if the U.S. has withdrawn its steel and aluminum tariffs on Mexican imports. Mexico retaliated with high tariffs on some U.S. farm exports in return.

Earlier Monday, Mexico's economy minister, Ildefonso Guajardo, told reporters on his way into his fifth week of bilateral meetings with the Americans that he still had to conclude a "very important" issue. It's unclear whether this issue is now resolved. 

Mexico's economy minister, Ildefonso Guajardo, seen here last Thursday, is in his fifth week of talks in Washington with United States trade representative Robert Lighthizer. (Chris Wattie/Reuters)

The U.S.-Mexico negotiators have been trying to make a breakthrough on the deal's automotive chapter, after talks to redefine what should constitute a tariff-free North American vehicle broke down prior to the Mexican presidential election in July.

The revised rules will require 75 per cent of auto content to be made in the United States and Mexico, up from 62.5 per cent, and 40-45 per cent of auto content to be made by workers earning at least $ 16 per hour.

It's unclear, however, what will happen to automotive imports from Mexico that do not comply with these new rules. The U.S. tariff for non-NAFTA car imports is currently 2.5 per cent, a rate that does not provide a significant incentive to make costly changes to comply with the new rules.

U.S. officials briefing reporters later said the U.S.-Mexico deal wasn't designed to put pressure on anyone, and it wasn't a negotiating strategy meant to isolate Canada. It's hard to get three people to agree at the same time, the official said, characterizing the sequencing as a normal, ordinary way to come to an agreement.

Canada has been part of the talks over the last year, the official said — it's not like the Canadians are just coming in at the last minute.

Compromise reached on sunset clause

Rather than a five-year sunset clause, as originally proposed by the U.S., this new deal would set a 16-year term for the trade agreement, with a review process after six years to consider whether the deal would be renewed for another 16-year term. Officials briefing reporters said this longer period of time would protect the interests of investors.

Reporters were also told that the new deal represents an improvement for every sector over the previous NAFTA.

Lighthizer has spoken repeatedly of wanting a deal that can receive bi-partisan support in Congress, and strict labour requirements for Mexico were thought to be key to securing votes from Democrats in Congress.

White House senior adviser Jared Kushner, left, and Vice President Mike Pence, right, listen as United States Trade Representative Robert Lighthizer talks with President Donald Trump about a trade "understanding" between the United States and Mexico (Evan Vucci/Associated Press)

Investor-state dispute settlement (ISDS) provisions, contained in the current NAFTA's Chapter 11, are also dialed back, but not removed entirely.

Industries that sign direct contracts with governments — oil and gas, infrastructure, other energy providers and telecommunications — will continue to have protection under what an official called "old-fashioned" ISDS.

It also includes new measures on digital trade, financial services and intellectual property — all improvements the U.S. had sought in the Trans-Pacific Partnership — and officials suggested the new provisions exceed those the U.S. negotiated in the TPP, to which both Canada and Mexico were signatories.

The new agreement also includes a textiles chapter, to limit the use of inputs that don't originate in North America in the apparel trade, and stronger environmental provisions than the original NAFTA.

The Mexicans have agreed to increase the value of their "de minimis" shipment level to $ 100 US from $ 50 — shipments under this dollar amount enter Mexico without customs duties or taxes, and with minimal formal entry procedures.

Right now Canada's de minimis level is only $ 20 Cdn, raising the question of whether Canada now needs to increase its own level to be part of this deal. Such an increase might be welcomed by cross-border shoppers in Canada, but hurt Canadian retailers.

Mexico has also agreed to increase intellectual property protection for biologics drugs. The TPP would have offered eight years of protection, but this deal offers up to 10 years. 

Canada has not been part of the marathon talks, now in their fifth week in Washington. But an official suggested Canada would join them Monday afternoon.

Freeland returning from Europe

Foreign Affairs Minister Chrystia Freeland is on government business in Germany, but received updates from both the Americans and the Mexicans throughout the weekend. 

"Given the encouraging announcement today of further bilateral progress between the U.S. and Mexico, Minister Freeland will travel to Washington, D.C., tomorrow to continue negotiations," said a spokesperson for her office. "We will only sign a new NAFTA that is good for Canada and good for the middle class."

"Canada's signature is required," Freeland's office emphasized.

Guajardo said Sunday that once Canada returns to the table the three parties would need at least another week of negotiations.

In a tweet prior to Trump's announcement, Pena Nieto said he had spoken to Prime Minister Justin Trudeau to express the importance of Canada rejoining the trilateral talks this week.

A release from Trudeau's office Monday confirmed the pair spoke on Sunday and discussed the ongoing negotiations.

U.S. officials downplayed talk of tension between Trudeau and Trump during their briefing.

The briefing said that ideally Canada will be included in an agreement notified to Congress by the end of the week, or else the Trump administration would write that it has reached an agreement with Mexico and it is open to Canada joining it in the future. Officials emphasized that it would be a better agreement with all three countries involved.

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The U.S. wants a NAFTA deal within weeks. Is that possible?

​The United States is suddenly proposing a sprint to the finish toward a new NAFTA deal within about four to six weeks — a jet-fuelled pace that aims to soar past political obstacles and procedural hurdles.

Is it doable?

Count veterans of NAFTA 1.0 among the skeptics. In interviews Tuesday, the top Canadian negotiator in the original NAFTA and the top American trade official who completed the pact under Bill Clinton expressed their doubts.

“I don’t think so,” said John Weekes, Canada’s chief negotiator in the original deal.

“These are complex things … These aren’t the sort of things you can just decide bang, bang … (It) has to be a good agreement that makes sense for all three countries — and not taking short cuts, and not agreeing to a bad deal.”

The stated reason for the hurry now is simple: U.S. negotiators argue that political events beyond the spring could make it harder to finish a deal and get final ratification votes. In a few months, the Trump administration could face a more hostile Congress, and a more combative Mexican president.

The U.S. argues that there are just two months left to get a deal this year; otherwise, procedural rules — including the more than six months required to ratify an agreement in the U.S. Congress — will make a final vote impossible before 2019.

‘It’s going to take time’

A more realistic timetable in Weekes’s mind would be a deal by December. That’s similar to the estimate offered by his former American counterpart Mickey Kantor — Clinton’s first U.S. trade czar foresees at least six months more of negotiating.

“It’s going to take time,” Kantor said. “Trade agreements don’t end before their time … There are a number of issues on the table — they have to be resolved.”

Compare the current and past timetables.

The original NAFTA took 14 months to negotiate. Lawyers then combed the text for errors, Clinton was elected and insisted on new labour and environmental side-deals, and then there were ratification votes. In the end, it all took about 30 months.

The current negotiations are into their seventh month. Of the roughly 30 chapters to complete, six are done so far. That’s not fast enough, current U.S. trade czar Robert Lighthizer said at the close of a round in Mexico City.

“Now our time is running very short,” said Lighthizer, who described the four-to-six-week horizon in a chat later with American media.

But the NAFTA veterans suspect something else is afoot.

The big squeeze

They believe the Trump administration is trying to squeeze the neighbours. “I think they’re trying to pressure the Canadians and the Mexicans into a quick deal,” Kantor said.

“I believe that Lighthizer thinks, and what President Trump thinks — if he understands this, which is debatable — is that the steel and aluminum tariff pressure will cause Canada and Mexico to fold.”

That theory was bolstered this week when the threat of tariffs was dangled over the table. Lighthizer suggested that if Canada and Mexico sign a quick NAFTA deal, that could void any tariffs before they take effect.

Weekes offers two bits of advice to the Canadians.

The first is to nod politely, agree to the sped-up timetable — and then just keep doing whatever they need to do to get the best possible deal.

“I would be inclined not to (admit my doubts about the timetable),” he said. “I’d say, ‘We’re prepared to proceed very, very fast … Speed — we’re prepared to go very, very quickly.”‘

Morneau says Canada asking for exemptions from US tariffs1:00

His second suggestion is to show a counter-threat on the steel and aluminum tariffs.

Weekes suggests mapping out a longer-than-necessary list of products — potential retaliatory targets — where tariffs would create maximum political damage for American politicians, but the least economic damage.

He would make that preliminary list public, in the hope that it scares a few people in Washington. He would hope never to have to use it. And he would ignore the Economics 101 lectures about tariffs being mutually destructive.

“I think we need to do something to make sure we don’t look like we’re pushovers,” Weekes said.

“If we roll over, we’re basically saying, ‘Come after us anytime. Be my guest.”‘

It’s not clear whether Trump’s tariffs will ever become reality.

Trump’s tariffs are polling badly

A newly released Quinnipiac poll said the tariffs are quite unpopular — with just 28 per cent of Americans wanting a trade war and 31 per cent wanting tariffs. Already the administration says the penalties might never come into effect for Canada and Mexico if there’s a new NAFTA.

The idea of tariffs on Canada is even becoming a political liability for the administration. For those Americans bashing the steel and aluminum plan, the notion of a trade war against Canada has actually become a favourite talking point.

President Donald Trump plans a more formal announcement within about a week. That coincides with a planned campaign rally in the steel-producing state of Pennsylvania, where there’s a hard-fought congressional election March 13.

On Tuesday, the president indicated he would be delicate in imposing tariffs: “We’ll do it in a very loving way,” he said, standing next to the prime minister of Sweden.

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'Step forward': NAFTA Round 6 talks wrap up in Montreal with some progress

Trade ministers from Canada, Mexico and the United States wrapped up the sixth NAFTA negotiations in Montreal today, agreeing some progress was made but acknowledging tough challenges still lie ahead to strike a new deal.

U.S. Trade Representative Robert Lighthizer said while some progress was made, he hopes it will accelerate and achieve “major breakthroughs.”

“This round was a step forward, but we are progressing slowly,” he said.

Lighthizer said trilateral negotiations are more “complicated and contentious” than bilateral talks.

The three political trade leaders closed a chapter on anti-corruption and made progress on other key areas.

In his closing remarks, Lighthizer also took the opportunity to rip into a trade challenge launched by Canada against the U.S., calling the World Trade Organization filing against Washington’s use of anti-dumping and anti-subsidy duties a “massive attack on all of our trade laws.

Foreign Affairs Minister Chrystia Freeland said Canada prefers a negotiated settlement, but in the meantime, will protect the domestic softwood lumber industry.

Canada appeared to be mounting a case on behalf of the rest of the world, since it cited almost 200 examples of alleged U.S. wrongdoing, almost all of them concerning other trading partners, such as China, India, Brazil and the European Union.

The last time the three politicians met following a round of talks, Freeland openly accused the United States of deliberately trying to undermine NAFTA, calling its list of unconventional proposals “troubling.”

She also warned that an updated NAFTA can’t be achieved with a “winner-takes-all mindset,” or one that tries to undermine, rather than modernize, the agreement.

Lighthizer pushes through media1:23

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